First Majestic Silver Reports Net Loss in Q1 2018

First Majestic Silver (TSX:FR, NYSE:AG) experienced a net loss in the first quarter of the year due in part to a decline in output, the company reported on Wednesday (May 9).

Citing lower grades as the reasoning behind a lower Q1 output, First Majestic announced a net loss of US$5.6 million, compared to net earnings of US$2.7 million this time last year. Excluding non-cash and non-recurring items, the company generated an adjusted loss of US$10.1 million during the quarter.

“In the first quarter, lower production rates resulted in a slight decrease in revenues and cash flows compared to the prior quarter,” stated Keith Neumeyer, president and CEO of First Majestic.

“This temporary decrease in production, which was primarily due to lower head grades, naturally resulted in higher cash costs per ounce. Nevertheless, we managed to beat our overall cost guidance during the quarter due to strong gold production at the Santa Elena, San Martin and La Guitarra operations,” he added.

Revenues decreased by 15 percent in Q1, sliding from US$69.1 million to a total of US$58.6 million.

The year-on-year decrease was the result of an 11 percent decline in silver-equivalent ounces sold, as well as a 5 percent decrease in the average realized silver price, which fell to US$16.76 an ounce.

First Majestic also reported an output of 3.9 million silver-equivalent ounces, which included 2.2 million ounces of silver, 15,887 ounces of gold, 4.4 million pounds of lead and 1.6 million pounds of zinc. Silver-equivalent output was 4.3 million ounces in the first quarter of 2017.

Despite the losses in Q1, the company believes that it is headed towards the green thanks in part to the newly adopted San Dimas project.

“Looking ahead, we plan to provide an updated production, costs and capital expenditure guidance in July to reflect the integration of the San Dimas operation. We remain focused on developing our key growth projects, most importantly our roaster project, which is expected to significantly increase silver production at La Encantada in the second half of 2018,” Neumeyer stated.

On Thursday (May 10), First Majestic announced it had completed the acquisition of Primero Mining (TSX:P), and with that, the company will take possession of the San Dimas mine.

“With this closing, First Majestic is integrating a large, world-class, silver and gold mine into its portfolio of operating mines. The San Dimas mine, becoming our seventh mine in Mexico, will result in a transformational leap forward in our production profile with an estimated doubling of profitable ounces produced,” said Neumeyer.

“In the near future, we will be communicating our plan for San Dimas which will include ways to further improve productivity over the next 12 months,” he added.

As of 2:31 p.m. EST on Thursday, shares of Majestic Silver were trading at US$9.19 in Toronto.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.